Correlation Between Amer Sports and Crown Holdings

Can any of the company-specific risk be diversified away by investing in both Amer Sports and Crown Holdings at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Amer Sports and Crown Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amer Sports and Crown Holdings, you can compare the effects of market volatilities on Amer Sports and Crown Holdings and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Amer Sports with a short position of Crown Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amer Sports and Crown Holdings.

Diversification Opportunities for Amer Sports and Crown Holdings

-0.35

Correlation Coefficient

Amer Sports  Crown Holdings

Very good diversification

The 3 months correlation between Amer and Crown is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Amer Sports and Crown Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Holdings and Amer Sports is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Amer Sports are associated (or correlated) with Crown Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Holdings has no effect on the direction of Amer Sports i.e., Amer Sports and Crown Holdings go up and down completely randomly.

Pair Corralation between Amer Sports and Crown Holdings

Allowing for the 90-day total investment horizon Amer Sports is expected to under-perform the Crown Holdings. In addition to that, Amer Sports is 1.86 times more volatile than Crown Holdings. It trades about -0.17 of its total potential returns per unit of risk. Crown Holdings is currently generating about 0.19 per unit of volatility. If you would invest  7,815  in Crown Holdings on February 2, 2024 and sell it today you would earn a total of  491.00  from holding Crown Holdings or generate 6.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Amer Sports  vs.  Crown Holdings

Amer Sports

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Amer Sports has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Amer Sports is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Crown Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Crown Holdings is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Amer Sports and Crown Holdings

The main advantage of trading using opposite Amer Sports and Crown Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amer Sports position performs unexpectedly, Crown Holdings can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Crown Holdings will offset losses from the drop in Crown Holdings' long position.

The idea behind Amer Sports and Crown Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.